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Automobile industry

Ford Shelves Plans to Double Exports to Mexico Amid Peso Crisis

Strategic Insights

— 2 min read

The Mexican market, once hot for auto exports from the US and Canada, has grown cold, with Ford Motor Co. announcing it will no longer pursue its goal of doubling exports to Mexico this year. The peso devaluation has made imported cars too expensive for Mexican buyers, and Ford chairman Alexander Trotman expects demand to dry up. This development comes as the North American car market shows signs of weakening, with consumers becoming wary of big-ticket purchases due to rising interest rates.

Key Takeaways:

  • Ford plans to reduce its exports to Mexico due to the peso devaluation, which has made imported cars too expensive for Mexican buyers.
  • The peso's devaluation has caused a significant price increase in peso terms for cars imported from the US and Canada, leading to a dramatic decline in demand for these products.
  • The St. Thomas plant in Ontario is scheduled to build 10,000 big sedans for the Mexican market this year, but may not meet this target due to reduced demand.
  • The Oakville plant shipped 800 Windstars to Mexico last year and may not see a significant impact if they fail to export any this year, as it would only be a day's production.
  • Ford's car sales at its two Mexican assembly plants will also be affected, as the vehicles contain 75% U.S. or Canadian parts.
  • The main plant in Hermisillo is already operating at capacity, making it difficult for Ford to increase production to take advantage of cost reductions.
  • The Mexican market had shown impressive growth, with imports rising 1,000% in the first five months after the North American free-trade agreement was signed, but this growth is likely to be scaled back.

Statistics:

  • 25,000 vehicles were exported to Mexico by Ford in 1994.
  • Ford's ambition was to ship 50,000 vehicles to Mexico in 1995.
  • The peso has lost more than half its value since December 20, 1994.
  • 10,000 big sedans were scheduled to be built at the St. Thomas plant for the Mexican market this year.
  • 800 Windstars were shipped to Mexico by the Oakville plant last year.
  • 75% of the parts in Ford's cars made in Mexico come from the US or Canada.
  • 130,000 Escorts were shipped to the US and Canada by Ford's Mexican plant last year.
  • Mexican exports rose 1,000% in the first five months after the North American free-trade agreement was signed.

Sources:

  • "Ford Motor Co. to Reduce Mexico Exports: Chairman" by Byline: MADELAINE DROHAN DAVOS, Switzerland -- BY MADELAINE DROHAN European Bureau DAVOS, Switzerland.

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